U.S. oil prices remained near two-year highs on Monday on the back of the ongoing closure of the Keystone pipeline connecting Canada and the United States, while expectations of extended OPEC-led supply cuts also supported markets. U.S. West Texas Intermediate (WTI) crude futures were at $58.91 a barrel at 0029 GMT, 4 cents below their last settlement but still close to two-year highs of $59.05 reached on Friday. Brent crude futures were at $63.84 a barrel, virtually unchanged from their last close. The closure of the 590,000 barrels per day (bpd) Keystone pipeline following a spill has helped drive up U.S. crude as it reduces stocks. “WTI prices … continue to be supported by the shutdown of the Keystone pipeline,” said French bank BNP Paribas.”WTI (is) currently trading very close to $59 per barrel. This represents a 38-percent increase in price since mid-June and makes oil one of the best performing assets over that period,” said William O’Loughlin, analyst at Rivkin Securities.
Markets have also been tightening globally due to an effort by the Organization of the Petroleum Exporting Countries (OPEC) and a group of other producers, including Russia, to withhold 1.8 million bpd of output since January. The deal expires in March 2018, but OPEC will meet on Nov. 30 to discuss its policy. “With the OPEC meeting occurring this week, oil traders are expecting an extension to the production cuts,” O’Loughlin said. Russian Energy Minister Alexander Novak said on Friday that Russia would discuss the details of an extension on Nov. 30, but made no mention of how long this should last beyond its March expiry. The uncertainty of how committed Russia is to ongoing cuts, as well as rising production in the United States, mean crude prices are being prevented from rising much further, traders said.
“There is plenty of room for disappointment … Should the outcome of the next OPEC meeting fall short of expectations, the large net-long speculative position on oil futures can unwind, sending prices lower and volatility higher,” BNP Paribas warned. In the United States, crude production <C-OUT-T-EIA> has risen by 15 percent since mid-2016 to 9.66 million bpd, and increasing drilling activity for new production means output is expected to grow further. U.S. energy companies last week added oil rigs, with the monthly rig count rising for the first time since July, to 747 active rigs, as producers are attracted by climbing crude prices.